Tax Matters

MARK: Hello and welcome to Tax Matters, our quarterly podcast where we chat about what’s new in UK tax law. I'm Mark Braude and I'm joined today by Emma Bradley and we’re both partners in TLT’s tax team.

Over the next few minutes, we’ll talk you through some of the key tax developments we’ve been keeping an eye on. We’ll cover a number of key tax changes from 6 April 2026, some recent consultations and three recent cases and we’ll end with new HMRC guidance on tax certainty for major projects, compliance for groups and deferred remuneration. So let’s get straight into it.

EMMA: Thanks Mark. April is a big month this year. There’s a whole bundle of changes landing almost at once, so this is very much a reminder section—but an important one. Starting with capital allowances, from April, the main rate writing‑down allowance drops from 18% to 14%. That applies from 1 April for corporation tax, and 6 April for income tax.

On capital gains tax, business asset disposal relief and investors’ relief are both getting more expensive—the rate goes up to 18%. And there’s also a procedural change: incorporation relief will now need to be actively claimed for business transfers to a company.

MARK: Another big shift is carried interest. From 6 April, that stops being taxed as capital and instead gets treated as trading income—so income tax and Class 4 NICs apply. Construction is also in focus. HMRC will have new powers under the Construction Industry Scheme to cancel gross payment status where a business knew—or should have known—that payments were connected to tax fraud. And there’s potential exposure to additional payments and penalties too.

EMMA: On the more positive side, there are some expansions to EIS, VCT and EMI. For EIS and VCT, investment limits are going up to £10m and asset thresholds are increasing. EMI, in particular, is being widened quite significantly. From 6 April, the gross assets test will increase to £120m from £30m, the employee limit will increase from 250 to 500 and the overall company EMI share option limit will increase to £6m from £3m. Plus the EMI holding period for tax advantages is being extended from 10 to 15 years, including for existing options.

Finally in this section—umbrella companies. From April, joint and several liability for PAYE failures comes in, meaning HMRC can pursue agencies or, in some cases, end clients.

So overall—quite a lot happening. These changes affect transactions, incentives, and compliance risk, all at the same time.

MARK: Next up, the Association of Tax Technicians has published its top ten asks for the tax system this year. A few themes really stand out. One is digital—secure electronic communication with HMRC, and the ability to track correspondence, returns and claims. Another big one is updating outdated allowances. Things like mileage rates and staff party exemptions just haven’t kept up with inflation. And there’s also a strong focus on improving the agent experience—particularly allowing multiple agents to be authorised at the same time for things like VAT, PAYE and corporation tax.

If adopted, a lot of these changes would genuinely reduce admin burdens and friction with HMRC. Whether they’re taken forward is another question—but they’re worth keeping on the radar.

EMMA: The government has also been consulting on some CIS simplifications. One proposal would put payments to certain public bodies on a clear statutory footing, rather than relying on an extra‑statutory concession. The other is more of a compliance headache: mandatory monthly nil returns unless HMRC is told in advance that no subcontractors will be paid.

That’s a change in behaviour for a lot of contractors—and it increases the risk of penalties simply for missing a filing.

MARK: Moving on to something slightly further out—the UK’s Carbon Border Adjustment Mechanism. This comes into force in January 2027, but the consultation on the draft legislation is already open.

It affects importers of things like steel, cement, aluminium and fertilisers and will impose duties on those products based on the greenhouse gas emissions associated with their production. The new regime will bring with it a whole new reporting and compliance framework. The detail here really matters, because it will determine how costly and complex compliance is in practice. The consultation closes on 24 March 2026.

EMMA: There’s also an interesting consultation linked to the Employment Rights Act 2025 and the new fire‑and‑rehire protections. Specifically, it looks at whether changes to benefits—like share schemes—should be treated as changes to pay, and therefore protected. If share schemes end up being classified as “restricted variations”, that could seriously limit employers’ flexibility to change or withdraw them.

The fire and re-hire consultation closes on 1 April, and the outcome will be particularly important for businesses where equity incentives form a key part of remuneration.

MARK: Let’s move on to our three case studies. Our first case looks at whether a long-standing agreement with HMRC can be relied on indefinitely. In MWL International, the business had been operating for years on the basis of tax treatment agreed with HMRC in 1993 in relation to the use of “pool cars” by the company’s employees. In 2021, HMRC decided that the agreed tax treatment should not have been applied in previous tax years.

MWL argued that HMRC should be estopped from changing its position or that it had a legitimate expectation that the tax treatment agreed with HMRC would apply during the tax years concerned.

The Upper Tribunal didn’t agree. It confirmed that HMRC can’t be bound by historic agreements or understandings if they conflict with the underlying legislation. In relation to the legitimate expectation claim, the Upper Tribunal found that it was not conspicuously unfair to allow HMRC to resile from the 1993 agreement. This was because on balance, the unfairness to the taxpayer was significantly outweighed by other factors, such as the public interest in the proper collection of taxes.

The takeaway here is that informal arrangements, correspondence, or even long‑running practices don’t give permanent protection. Businesses still need to sanity‑check historic positions against the law as it stands now. It’s sensible for businesses to check if they have any long-standing arrangements with HMRC and if so, review those arrangements against current law and HMRC guidance.

EMMA: The issue in the Rawlinson case was whether a payment made on termination could benefit from the disability exemption, meaning that it could be paid tax free.

Whilst the parties were agreed that there was a relevant disability for the purposes of the exemption and that the disability was the reason for the termination, that was not enough for the exemption to be available. Instead, the payment itself had to be made because of the disability. In this case, the payment was a PILON, paid simply to settle the taxpayer’s right to contractual notice and that right to notice would have existed regardless of the reason for the termination. This meant that the exemption was not available.

The decision highlights the importance for employers and employees of understanding both the legal basis and the stated purpose of termination payments. Careful drafting and tax analysis of settlement agreements is required to avoid unexpected PAYE liabilities or failed refund claims.

MARK: Our last case study, Akin Kog, is a VAT decision with some uncomfortable lessons for directors. The issue was whether a director acted deliberately in allowing the sale of a property, free of VAT, by a company of which he was a director without knowing for certain that the property had not been previously opted to tax.

The First Tier Tribunal found that whilst the taxpayer did not have direct knowledge at the time of the sale that an option to tax was in place over the property, the taxpayer had, what the FTT described as, “blind eye knowledge” of the option to tax when he submitted the relevant VAT return. The taxpayer had a suspicion that HMRC would confirm that the property was opted and took a deliberate decision not to follow up with HMRC seeking confirmation of that fact – this was “blind eye knowledge”.

This case confirms that if a taxpayer is aware of a real risk and chooses not to ask questions or dig any deeper, that can be enough for a finding of deliberate behaviour. That mattered here because it opened the door to a personal liability notice for VAT—so the consequences weren’t just corporate, they were personal.

EMMA: Before we wrap up, let’s have a quick run‑through of some new HMRC guidance that’s worth flagging.

First up is the draft guidance on the new advance tax certainty service for major projects, which is due to launch later this year. This is aimed at very large UK investment projects—think infrastructure or major developments—where tax uncertainty can be a real barrier to committing capital. If the conditions are met, businesses will be able to get upfront confirmation from HMRC on how key taxes will apply to a project. That confirmation will apply potentially for up to five years.

It won’t be available in every situation but for the right projects, it could significantly reduce risk and improve the reliability of financial modelling.

MARK: We’ve also seen new Guidelines for Compliance—this time focusing on how businesses should share group structure information with HMRC.

These are particularly relevant for large or complex groups, and for situations like clearances or compliance checks, where HMRC often asks for detailed structure charts. The guidance sets out what HMRC expects to see as a minimum—things like entity type, ownership, jurisdiction, and any special features—and it encourages consistent formats to avoid back‑and‑forth questions.

There’s also a helpful nod to practicality, with HMRC suggesting that businesses reuse information prepared for Country‑by‑Country reporting, where possible, to reduce duplication.

EMMA: Finally, there’s new international guidance on deferred remuneration and how it’s taxed when employees move between countries. This covers things like bonuses and share options that are paid after someone has changed their country of residence.

The key point is that, under most tax treaties, it’s the employee’s residence at the time the income is received that matters—not when the work was done. That clarification should help employers and internationally mobile employees navigate withholding and reporting obligations with a bit more confidence.

MARK: Well, that's it for this edition of Tax Matters. If you'd like to know more about the topics we’ve discussed, the March edition of our Tax Matters briefing is available on our website. If you have any questions about these developments or how they might affect your business, please get in touch with your usual contact in our tax team.

EMMA: And if you are interested in hearing about mitigating tax risk in your business, do join us for our webinar on 14 May when we will be discussing the importance of the relationship between tax advice and tax compliance in mitigating tax risk. Registration details will be available shortly on TLT’s LinkedIn account.

Goodbye from both of us and thanks for listening to Tax Matters.